Flipkart raises $1.4 bn, the biggest in its history, from Microsoft, Tencent; buys out eBay India

Flipkart, the country's number one online marketplace firm, has raised $1.4 billion from Tencent, eBay and Microsoft, according to a statement posted on the company's website. The post-transaction valuation of Flipkart will be at $11.6 billion. The deal will see Flipkart buying out eBay's Indian operations as a part of the deal for an investment in the country's leading e-commerce marketplace.

“We are delighted that Tencent, eBay and Microsoft — all innovation powerhouses — have chosen to partner with us on their India journey. We have chosen these partners based on their long histories of pioneering industries, and the unique expertise and insights each of them bring to Flipkart. This deal reaffirms our resolve to hasten the transformation of commerce in India through technology,” Sachin Bansal and Binny Bansal, founders of Flipkart, said in the statement.

Reuters

Martin Lau, president, Tencent, a leading provider of internet value-added services in China, has said the strategic partnership will enable the Chinese company to participate in the exciting opportunities in e-commerce and payments in India.

"We look forward to helping Flipkart to deliver compelling experiences to users throughout India, and to contribute to the development of the internet ecosystem there,” Lau was quoted as saying in the statement.

Media reports had earlier speculated about the possibility of such a deal with the three global technology giants, and a buyout of eBay's India operations.

Including the latest round, the company's fund raising exercise has reached over $3 billion, mostly coming in from international investors. Other investors in the company include Tiger Global Management, Naspers Group, Accel Partners and DST Global.

The investment by eBay is accompanied by a strategic commercial agreement with Flipkart. In exchange for an equity stake in Flipkart, eBay will invest and sell its eBay.in business to Flipkart. However, eBay.in will continue to operate as an independent entity as a part of Flipkart.

“The combination of eBay’s position as a leading global e-commerce company and Flipkart’s market stature will allow us to accelerate and maximize the opportunity for both companies in India,” Devin Wenig, President and CEO of eBay Inc, was quoted as saying in the statement.

Under a cross-border trade agreement, customers of Flipkart will gain access to the global inventory on eBay, while eBay’s customers will have access to Indian inventory of Flipkart. This will give sellers on Flipkart platform an opportunity to expand their sales globally.

Sachin Bansal and Binny Bansal have termed the development as a “landmark deal for Flipkart and for India” and hailed it as an endorsement of the Indian startup’s tech prowess, innovative mindset and its potential to disrupt traditional markets.

The fresh fund infusion is coming at a time when the company has been facing stiff competition from the US e-commerce giant Amazon and China's Alibaba making its grand entry into the Indian online shopping space through Paytm's online market place.

The infusion is expected to provide warchest for Flipkart to fight both the deep-pocketed overseas giants.

The valuation of $11.6 billion is significantly lower than $15 billion it commanded in 2015 when it raised $700 million from Tiger Global and Qatar Investment Authority. However, it is to be remembered that the development comes at a time when the startup ecosystem in India is struggling to raise funds and remain profitable.

In the recent past, Flipkart's valuation was consistently marked down by its overseas investors. In the current month, a mutual fund managed by Morgan Stanley had marked down the value of its holding in Flipkart for the fifth straight quarter, valuing the e-commerce major at $5.37 billion.

Last year, Morgan Stanley had marked down the value of its shares in Flipkart for the September quarter to $52.13 per share from $84.29 per share in March. Throughout last year, the Bengaluru-based firm has seen several markdowns by its investors like Valic Co, Vanguard, Fidelity and T Rowe Price.

Meanwhile, in a view to strenthen its position, Amazon India received Rs 7,000 crore in fund infusion from its US parent for 2017, while Alibaba entered the Indian market by acquiring a majority stake in payments provider Paytm’s online marketplace.

Earlier this month, Alibaba, along with investment firm SAIF Partners, said it will pump in $200 million in Paytm's online marketplace unit. India's third largest online marketplace firm Snapdeal is also holding talks with its largest shareholder SoftBank Corp, which may invest $100-150 million in tranches.